Regulator Halts Employers From Requiring Paychecks on Cards

In response to concerns about employers mandating payroll cards that carry high fees, the Consumer Financial Protection Bureau says employers must provide other options.

September 16, 2013

NEW YORK – Consumer Financial Protection Bureau Director Richard Cordray issued a statement last week warning employers that they cannot force employees to receive their wages on a payroll card.

“Employees must have options when it comes to how they receive their wages,” Cordray told the Wall Street Journal.

UPI writes that the CFPB received reports of employers, “particularly in the retail and food service industries,” that are distributing wages solely through payroll cards. “Federal law, however, prohibits employers from mandating that employees receive wages exclusively on a payroll card,” the agency warned.

Retailers such as Home Depot allow employees to receive their wages on payroll cards. "We worked with providers to ensure that we were eliminating fees wherever possible and we clearly communicate the specifics of any fees that are charged," a Home Depot spokesperson told the WSJ.

The cards, which act like a debit card, can carry fees that critics say aren't clearly disclosed, notes the WSJ. Companies, state governments and colleges increasingly use payroll cards to avoid the costs of paper checks.

Use of the cards has grown from 3.1 million cards active in 2010, to 5.8 million today, according to Aite Group. That figure is expected to rise to 10.8 million in 2017. Employers this year are expected to load $43 billion onto the cards, which could hit $68.9 billion by 2017.

Advertisement
Advertisement
Advertisement